November 20, 2013

I Just Lost My Insurance Because of Obamacare. What Do I Do?
A step-by-step guide to replacing your health insurance

Insurance companies have cancelled policies for several million Americans, causing widespread confusion and anxiety. Here’s an attempt to explain what’s happening and why—and what you can do if you’ve received one of those letters.

Sorry to hear that. It’s pretty scary. Most likely it’s a by-product of the Affordable Care Act—you know, “Obamacare.” You can get a new plan, but you may not find one just like your current policy. The price might be different, too.

Click the image to read the Obamacare FAQ as a decision chart.

I thought President Obama said I could keep my plan if I like it. I’m pissed off.

That’s fair. The vast majority of Americans get their health insurance from large employers or from government programs like Medicare and Medicaid. Not much is changing for them. But the law is reorganizing the “non-group” market. That’s for people who buy insurance on their own, directly from insurers. It’s a small portion of the population, but it’s a big country so that’s still a lot of people—probably a few million. It sounds like you’re one of them.

But why disturb insurance for people like me?

Because the non-group market is pretty messed up. It’s probably the source of most health insurance horror stories you’ve heard.

For one thing, insurers don’t like to cover people who might actually get really sick and run up big medical bills. When you apply, they check your medical history and records. If insurers find evidence of pre-existing medical conditions—or something about you, like your age, makes you a likely candidate for illness—they won’t offer you a regular policy at a normal price. They might charge you higher premiums. They might refuse to cover services related to pre-existing conditions. Or they might deny you coverage altogether. This is called “medical underwriting.”

In the past, if you got sick, insurance companies would frequently scour your records all over again, just to see if they could find something—anything—that was an early sign of illness. If they found one, they’d refuse to cover your bills and you’d be stuck with tens or even hundreds of thousands of dollars of medical bills. That was called “rescission.” Pretty much everybody thought that was awful. It was a big scandal. Obamacare prohibited that practice.

The other big problem with the non-group market is that insurers frequently sell policies that have really big gaps in coverage. The worst of these are so-called “mini-med” plans. You pay some absurdly low monthly fee—$25 or maybe $50—so it sounds like a great deal. But the benefit might consist of covering just a few doctor visits, or maybe a few hundred dollars a year. Then you’re on your own.

Even more generous policies on the non-group market frequently leave out key services. They might not include rehabilitative services or mental health or maternity. They might have huge deductibles, like over $10,000 for one person. They might have no limit on how much you could pay out of your own pocket. People usually don’t know about this when they buy the policy, because insurance is pretty confusing. They only find out after they’ve gotten in an accident or developed some ailment—and discover the huge bills.

So what does Obamacare do about this?

It puts an end to medical underwriting. Insurers have to sell policies to anybody willing to pay the premiums. And they can’t charge people more, or hold back benefits, to people with pre-existing conditions. They can charge older people more than younger people, but the rates can’t vary by more than a factor of three. (Today, insurers will typically charge older people as much as five times what they’d charge a younger person.) The only other variable insurers can use in pricing is smoking: If you’re a tobacco user, they can charge you more.

The other big change is on the benefits side. The law sets a broad standard for how much coverage all policies must provide. At a minimum, they must provide an “actuarial value” of 60, which is like saying the policy must cover 60 percent of the typical person’s medical expenses. There’s a limit on out-of-pocket expenses: If you have an Obamacare policy, and over the course of a year you end up spending more than $6,350 in co-payments, deductibles and so on, the policy must pick up additional charges completely, as long as they are part of your covered services. (For a family, the out-of-pocket maximum is twice that—$12,700.)

The law also establishes a set of “essential health benefits” that all policies must cover. The standard is a little complicated to explain, but it’s more or less like the requirements now in place for most small business policies—with specific guarantees of prescriptions, mental health, rehabilitative services, and maternity, among other things.

Insurers who scrapped their old plans did so either becuase state regulators ordered them to do so—or because the insurers decided, for business reasons, to start anew rather than modify existing plans to meet Obamacare guidelines.

Maternity and mental health, huh? What if I don’t need them?

This has been a subject of debate lately. Some people would argue it’s wrong to make you pay for services you don’t think you will need. Others would argue that’s the whole point of insurance—to get you paying for a menu of services, only some of which you might need. For example, most insurance policies cover cancer. You might never get cancer, but most people want to insure against the risk of it. Why not mental illness and other services the law requires that insurance include?

Maternity and pediatric services are a bit different, since only women actually use maternity care and only people with children need pediatric care. Some would say men shouldn’t have to pay for maternity and that people shouldn’t pay for pediatric services if they don’t have or expect to have kids. Advocates for including these would argue that they are an investment in the public good that pays in the long run, that men are equally responsible for parenthood even if they don’t physically carry babies, and that getting born XY rather than XX is precisely the sort of random event for which insurance is supposed to pay. Also, for what it’s worth, lots of people don’t plan to have kids but end up with kids anyway.

Do keep in mind that, for better or for worse, employer policies operate by the same principles. Employees pay the same premiums, regardless of gender or medical condition. And while employees sometimes have choices over benefits, particularly at really large companies, they don’t typically get to choose whether to include stuff like mental health and maternity.

So what kind of options will I have?

Each state has its own marketplace, with its own insurers and multiple plan options. By law, the benefits fall into different categories—bronze, silver, gold, and platinum. Bronze plans are the least generous: For the typical person, they’d cover about 60 percent of medical expenses. Platinum plans are the most generous: They’d cover about 90 percent of medical expenses. People under 30 have the option of enrolling in special catastrophic-only plans, which are pretty similar to the bronze plans but structured a bit differently and sometimes cheaper. See this FamiliesUSA guide to the metal levels if you want more specific information.

The plans are available to anybody, regardless of pre-existing condition. They must cover each of the essential health benefits, with the out-of-pocket limit I mentioned previously. But every plan will structure its benefits differently. You'll want to pay close attention to the co-payments and deductibles, which are the costs you pay out-of-pocket when you go to the doctor, pick up a prescription, and so forth. Those costs can get pretty high. You might be surprised—and in some cases surprised unpleasantly—to learn how threadbare even some of the new Obamacare policies can be.

How do I learn about my options and pick one?

The primary method of enrollment is supposed to be online. The federal government is running websites for 36 of the state marketplaces, while 14 states plus the District of Columbia are running their own. If you just go to healthcare.gov, it will direct you to the proper site. If you want help from a human being, you can use a toll-free number or visit a “navigator” in person. Navigators are people the federal government and state trained to help people enroll. You can also try enrolling via an insurance broker or insurance company, as people have traditionally done, or by printing out the paper application (from healthcare.gov) and mailing it.

Sounds great. But I heard the websites aren’t working.

This has been a huge problem. Most of the state-run sites are working pretty well right now, after some early glitches. The best seem to be in California, Connecticut, Kentucky, and New York. But the federal site, healthcare.gov, barely worked for the first few weeks. Performance appears to have improved a great deal in just the last few weeks. More and more people are using it successfully. But some still run into errors.

President Obama has said that most people will be able to use the federal sites by the beginning of December, in time to arrange coverage for January. But if the site can't handle the expected rush of traffic, the federal government is going to have to rely more heavily on alternative methods of enrollment—or come up with some other contingency plans, so that nobody goes uninsured at the beginning of the year. They’ll probably think of something, but it might be pretty cumbersome for everybody involved—state officials, insurers, doctors and hospitals and pharmacies, and, of course, people like you. This is another good reason to be angry.

When I go on the websites, I’ll find these new plans with these new benefits, available to everybody. Super. But what are they going to cost me?

Good question. The requirement that insurers sell to everybody and the requirement that all plans include comprehensive coverage will tend to make insurance more expensive in most states. Think of this way: We’re telling the insurers they must cover sick people they wouldn’t cover before and include benefits they wouldn’t include before. That means they’re going to spend more money. In response, they’re going to raise premiums.

How those prices compare to your current policies will depend on what you have now and where you live. In states like New York, which already had many of these regulations, the prices will tend to come down. But most states don't have such regulations on the books already. In those places, the premiums will tend to go up.

I knew it: Obamacare is going to make me pay more for my insurance, right?

Not so fast. The law is changing a bunch of other things, too. It’s introduced a bunch of “payment reforms” into Medicare that will encourage doctors, hospitals, and drug and device makers to be more efficient and lower their prices. Many experts believe the industry is already responding and that those responses are one reason health care costs aren’t rising as fast as they have in the past. You might not notice these savings, because they are the equivalent of premium increases you’ll never see. But they appear to be real. And they are supposed to get bigger over time.

The law also has something called the “medical-loss ratio.” It’s basically a limit on how much money insurance companies can divert to profits and overhead. Or, to put it another way, it’s a requirement that insurers spend most of their money on actual medical services for beneficiaries. This is basically a check on insurance company profiteering and, to the pleasant surprise of many experts who were skeptical of it, it seems to be having some effect. The provision went into effect not long after the Affordable Care Act became law and, already, several million Americans have gotten rebate checks because of it.

But I heard premiums were doubling or more in some cases, even with those changes.

Again, you’re hearing only part of the story. The law also has subsidies, in the form of tax credits. And these are very special tax credits. You don’t have to wait until the end of the year to file for them. You get them right upfront, when you buy your insurance policy through one of the marketplaces. It’s basically like a discount on the sticker prices and for some people the discount will be huge—like thousands of dollars a year, almost as much as the insurance itself. For several million people, the price of the cheapest available policy will be absolutely nothing. The plan will be free. Of course, those are the bronze plans that don’t offer much coverage and those people might want to pay a little more to get better insurance. Also, remember that not everybody gets those tax credits.

So will I get one of those discounts?

It depends entirely on your income. The subsidies are largest for people whose incomes are at or just above the poverty line, which is about $11,000 for an individual and $24,000 for a family of four. The higher your income, the less money you get. Once your income becomes higher than 400 percent of the poverty line, which is roughly $46,000 for an individual and $94,000 for a family of four, you are no longer eligible for subsidies. You’d have to pay the full insurance premium.

To see what kind of subsidy you would probably get, try out the Kaiser Foundation's "subsidy calculator." It will tell you how much you'd have to pay for the second-cheapest silver plan in your area, as well as the cheapest bronze plan. It's not an official estimate. And the actual premiums will be different if you decide to choose a different insurance plan.

By the way, the law has a second set of subsidies that haven’t gotten much attention. These are “cost-sharing subsidies.” They reduce the deductibles, co-payments, and so on, so that you don't have to pay so much every time you go to the doctor, fill a prescription, or need more intensive care. These subsidies are structured in the same way—the higher your income, the lower the subsidy—only they stop altogether at just 250 percent of the poverty, which is about $29,000 for an individual and $59,000 for a family of four.

What if my income is really low. Then what?

The original idea was that anybody with an income below 133 percent of the poverty line, or about $15,000 for an individual and $31,000 for a family of four, wouldn’t even bother with private insurance. They’d enroll in Medicaid, the same program that already insures tens of millions of low-income Americans. But the Supreme Court disrupted that plan. The states run their own Medicaid programs and, thanks to the Court’s July 2012 ruling on the Affordable Care Act, the states have a lot more leeway to reject the Medicaid expansion. About half have done just that.

If you live in one of those states and your income is above the poverty line, you can still qualify for the subsidies that will help you buy private insurance in the new marketplaces. But if your income is below the poverty line, then you may not qualify for Medicaid. It will depend on what guidelines your state had in place before.

If you’re wondering which states have expanded Medicaid to all low-income people and which ones haven’t, just look at a political map. Most of the blue states—the ones in which voters supported Obama in the last election—have expanded their Medicaid programs. Most of the red states have not. But there are some exceptions.

I heard some people won’t be able to see their doctors anymore. What’s that all about?

Insurers are trying to keep premiums low, in order to grab all those new customers in the marketplaces. One way to do that is to limit beneficiaries to a network of doctors and hospitals that will accept lower reimbursement. The idea isn't new: Insurers did a lot of this in the 1990s, when managed care—you know, HMOs—first became popular. Consumers didn't like it so insurers backed off just a bit, but now they're pushing the approach again. They figure that people will generally shop on price, even if it means sticking within narrow networks, and there's a lot of marketing evidence to suggest they are correct.

The problem is that some people want wider access, might be willing to be pay for it, but aren't going to find plans within their means that provide it. (Nobody is going to stop these people from seeing their favorite doctor or hospital, but the out-of-pocket charges will be more than many and possibly most can pay.) Plans are supposed to pick networks that provide quality care, not just cheap care. And Obamacare actually requires all plans to have "adequate" networks. But that doesn't mean plans will always include the doctors or hospitals people want. If you have a favorite provider or hospital, you'll want to check whether they belong to plans available to you—or whether you'd pay more to use them.

I heard the President told insurers not to cancel plans. So I can keep my current policy after all?

That depends. The president told insurers they had the option to renew existing plans, even those expiring sometime in calendar 2014, for one more year. And he told state regulators they had the option to allow plans to take that step. But notice the key word in both sentences: "Option." It's entirely at the discretion of the insurers and the state authorities. Some plans, like Florida Blue, have announced they will be offering customers the right to renew expiring policies. But the state insurance commissioner of Washington has already said he's sticking with the original policy: In his state, insurers can't renew plans expiring after December unless those plans qualify for the law's original "grandfather" clause. (That clause allowed plans in place as of March, 2010, to remain in effect indefinitely.)

What if I decide not to get insurance?

The law includes an individual mandate. If you have access to affordable coverage and decline to get it, you'll have to pay a financial penalty. In 2014, it's either 1 percent of your household income or a flat fee of $95 per adult and $47.50 per child, up to $285 for a family. You would pay whichever is sum is greater. The penalty increases in 2015 and 2016. The law does inculde some exemptions, so you can always check to see if you qualify for one.

So is Obamacare a good deal for me?

Only you can answer that. Partly it will depend on your circumstances. What's your income and health status? Where do you live? What kind of insurance do you have now? But partly it will depend on what you value. The government is establishing a new set of standards for health insurance and those standards are forcing many people, like you, to change your arrangements. Do you care about the protections the new law gives you? If those protections cost you more money—and for some people they will—are they worth it?

You might also have an opinion about the law's underlying philosophy. One way to think of Obamacare is as an attempt to spread the financial burden of illness across a more diverse group of people, so that they healthy will subsidize the sick and the wealthy will subsidize the poor. It's more or less the way employer insurance already functions. Do you think that's the right thing to do? The law pays for its new protections with some new revenues, like a new tax on the wealthiest Americans, and with some reductions in what Medicare pays providers and insurance companies. Do those bother you? Do they seem like a worthwhile tradeoff for making coverage more stable and widely available?

One parting note: Don't simply compare Obamacare coverage to the insurance you have now. America's health care system has been in flux for a long time. Even if the Affordable Care Act had never become law, you could have run into problems down the road—because your insurance had become unaffordable, because you needed new coverage and couldn't get it, or because your benefits didn't meet your needs once you got sick. Maybe you will like your options under Obamacare. Maybe you won't. Either way, make sure you think through what the future without those options might really be like.